12/20/2022
Within the U.S. financial system there are several agencies and government agencies that perform important functions. Thus we find ChexSystems, which is the equivalent of the FICO credit scoring system, but for accounts.
If you do not know exactly what this entity does, we tell you how it affects you.
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What is ChexSystems?
ChexSystems is essentially a consumer reporting agency for checking and savings accounts. This means that it is in charge of monitoring and keeping track of incidents or closures of these financial management instruments.
In this way, banks and credit unions can review the background of those who apply to open accounts.
If you intend to open an account in the United States, the financial institution in question will review your ChexSystems report. This document will detail any mistakes you have made in your banking history, such as outstanding debts, unpaid overdrafts, bounced checks, account closures and more.
In addition, this report may contain personal data related to your social security number, publicly available records, credit freezes and identity theft alerts. If you have written a check, a check, started a check cashing inquiry or opened a certain number of accounts, this is also recorded.
Like the major credit bureaus, ChexSystems is regulated by the FCRA (Fair Credit Reporting Act) and the FTC (Federal Trade Commission).
How does the ChexSystems report work?
The importance of ChexSystems lies in the fact that banks and credit unions can estimate the degree of risk of a customer.
Since this report contains the bad performances within the banking system, within the system you get a rating from 100 to 899 which works just like the credit score: higher scores mean higher level of trust.
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Among the common faults that appear in this report, we can mention the following:
- Unpaid negative balances. Missing 1 or 2 days is not a problem, but if you don't take care of the problem in time, you get reported.
- Debit/ATM card abuse. Usually refers to suspicious or fraudulent activity, such as including empty envelopes when depositing at an ATM.
- Excessive number of applications. It is not advisable to make multiple account requests in a short period of time, as it is considered a red flag.
- Bounced or overdrawn checks. If you make a mistake once, it's okay. When it is something repeated, you will be included in the ChexSystems registry.
- Accounts closed for cause. Writing bad checks and committing fraud will put you in the agency's crosshairs.
- Identity theft or suspected fraud. Using accounts for illicit activities is not permitted.
Ways to obtain a free ChexSystems Report
It is always a good idea to make sure that you do not have a negative banking history. This way you can make sure that your information is correct and that you have not suffered any identity theft.
By law, you are entitled to request a free report once a year. To do so, you have four options:
- Request it online. Go to the ChexSystems website, follow the steps and in 5 working days you will have it.
- Use the fax. Just print the form, fill it out and send it to 602-659-2197.
- Call ChexSystems. You must call 800-428-9623 and follow the instructions of the automated system to have the report sent to you.
- Mail your application. After printing and completing the application, send it to this address: Chex Systems, Inc. Attn: Consumer Relations 7805 Hudson Road, Suite 100 Woodbury, MN 55125.
What to do if you are on the ChexSystems registry?
Once you have the ChexSystems report in your hands, you can check the data to correct or take appropriate action.
According to the FCRA, no entity can keep negative information for more than 7 years (10 for bankruptcy). In fact, the FCRA deletes records after 5 years.
When correcting any errors within the report, you should initiate a dispute as soon as possible. This can be done online, by mail, or by faxing a request for investigation.
This process can take 30 days or more, depending on the willingness of the bank or the information collected by ChexSystems.
In the event that you need to open an emergency checking or savings account and you have a negative history, you can opt for 2 alternatives:
- Prepaid card. These are plastic cards that you can reload to make your transactions and are not linked to an account.
- Second chance accounts. These are instruments with more restrictions, minimum balance, no overdraft protection and no plastic (debit or credit).
Español: Qué es ChexSystems y qué servicios ofrece